If you have been wondering how to short sale your property, today is your lucky day. This type of real estate transaction involves convincing your lender to allow you to sell your home for less than you owe on your loan. Asking a bank to accept a loss is no easy feat, but with the proper information you can learn how to work with the bank to develop a win-win situation.
Explaining all the details of how to short sale real estate would require a book. This article presents a brief overview of the process and explains what is involved and what to expect. Unfortunately, not all banks operate under the same protocol. There is no one-size-fits-all negotiation strategy. However, tips and techniques exist to improve your chances of a successful outcome.
Obtaining short sale approval is not an easy task. If you plan to travel down this path, it is imperative to become educated about the benefits and consequences. The first thing you must realize is short sales require time, patience and persistence. Response times vary between lenders. Some will respond in two weeks, while others leave you hanging in suspense for two or more months.
When borrowers become delinquent on their home loan, the bank turns their account over to a loss mitigator. This person is responsible for working with borrowers to help them cure mortgage arrearages and get back on track with their loan. The typical solution is to modify the loan.
Loan modifications are the preferred choice for borrowers who have the financial ability to continue making mortgage payments. Some lenders require homeowners to pay the delinquent amount in full before modification can take place. Others require a partial payment; typically 50-percent of what is owed. A few lenders will roll mortgage arrearages to the end of the loan by extending repayment terms.
When mortgagors do not qualify for loan modifications, the next option might be to short sell the real estate. Each lender establishes protocol for how short sales are handled. Most lenders require borrowers to have a qualified buyer in place before they will grant permission to sell the home for less than is owed. Others will allow the property to be listed through a realtor. The sale must occur within a predetermined amount of time and for an established price.
An insider-secret for locating qualified buyers is through real estate investors. Today, many investors are intentionally seeking short sale homes because they make good investment properties.
Many investors purchase distressed properties with cash. Since the banking meltdown, investors have found it difficult to obtain traditional financing. Instead, they connect with wealthy investors or investment groups who offer soft money loans.
Real estate transactions can be expedited quickly when properties are purchased with cash. There is no waiting period for the buyer to obtain financing approval. There is no need to worry that the buyer won’t qualify for a mortgage loan.
It is crucial to determine what type of short sale your lender offers. Two types exist - Payment in Full without Pursuit of Deficiency and Deficiency Judgment. The latter should be avoided whenever possible.
When banks issue judgments they hold the borrower responsible for the difference between the balance due on the note and the sale price. Judgments can amount to several thousand dollars and remain on the debtor’s credit report until paid in full.
Payment in full means the bank accepts the sale price and releases the borrower from any balance due. Obviously, this is the best choice as it allows the borrower to walk away from their property without owing additional monies.
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